Problem Solving Survival Guide Volume I: Chapters 1-12 to accompany Accounting Principles, 11th Edition

CHAPTER 1

ACCOUNTING IN ACTION

OVERVIEW

You and every other member of society depend on information to function efficiently and effectively. For example, people who invest in business enterprises use economic information to guide their decisions about future financial possibilities. Information about the effects of past actions is accumulated to serve as an aid in making better decisions in the future.

As a financial information system, accounting is the process of identifying, recording, and communicating the economic events of an organization. In this chapter, we: (1) introduce the subject of accounting and GAAP (generally accepted accounting principles), (2) discuss the basic accounting equation and the effects of transactions on its elements, and (3) examine the composition of the four general purpose financial statements required for business enterprises.

SUMMARY OF LEARNING OBJECTIVES

1. Explain what accounting is. Accounting is an information system that identifies, records, and communicates the economic events of an organization (business or nonbusiness) to interested users.
2. Identify the users and uses of accounting. The major users and uses of accounting are as follows: (a) Management uses accounting information in planning, controlling, and evaluating business operations. (b) Investors (owners) decide whether to buy, hold, or sell their financial interests on the basis of ...